Correlation Between Lucky Cement and Pakistan State
Can any of the company-specific risk be diversified away by investing in both Lucky Cement and Pakistan State at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lucky Cement and Pakistan State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucky Cement and Pakistan State Oil, you can compare the effects of market volatilities on Lucky Cement and Pakistan State and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lucky Cement with a short position of Pakistan State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucky Cement and Pakistan State.
Diversification Opportunities for Lucky Cement and Pakistan State
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lucky and Pakistan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lucky Cement and Pakistan State Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan State Oil and Lucky Cement is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lucky Cement are associated (or correlated) with Pakistan State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan State Oil has no effect on the direction of Lucky Cement i.e., Lucky Cement and Pakistan State go up and down completely randomly.
Pair Corralation between Lucky Cement and Pakistan State
Assuming the 90 days trading horizon Lucky Cement is expected to generate 1.46 times less return on investment than Pakistan State. But when comparing it to its historical volatility, Lucky Cement is 1.51 times less risky than Pakistan State. It trades about 0.13 of its potential returns per unit of risk. Pakistan State Oil is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 10,810 in Pakistan State Oil on August 28, 2024 and sell it today you would earn a total of 16,575 from holding Pakistan State Oil or generate 153.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lucky Cement vs. Pakistan State Oil
Performance |
| Timeline |
| Lucky Cement |
| Pakistan State Oil |
Lucky Cement and Pakistan State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucky Cement and Pakistan State
The main advantage of trading using opposite Lucky Cement and Pakistan State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucky Cement position performs unexpectedly, Pakistan State can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pakistan State will offset losses from the drop in Pakistan State's long position.| Lucky Cement vs. Ghandhara Automobile | Lucky Cement vs. MCB Investment Manag | Lucky Cement vs. Escorts Investment Bank | Lucky Cement vs. Habib Insurance |
| Pakistan State vs. Dost Steels | Pakistan State vs. Allied Bank | Pakistan State vs. Adamjee Insurance | Pakistan State vs. Metropolitan Steel Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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